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Federal investigations into sex trafficking
In January 2020, the U.S. Secret Service reportedly received a tip that, in April 2018, Gaetz had accompanied Seminole County tax collector Joel Greenberg to a government office where Greenberg was producing fake IDs. Greenberg was indicted in August 2020 on an array of charges, including sex trafficking a 17-year-old girl in 2017 and creating fake IDs to facilitate sex trafficking. The investigation of Greenberg led federal officials to look into some of Gaetz's related activities. In late 2020, the Justice Department opened its investigation of Gaetz for allegedly sex trafficking the same 17-year-old girl in 2017 and whether he had violated federal sex trafficking laws by paying her to travel with him across state lines. As part of his plea bargain, Greenberg cooperated with the investigation of Gaetz and others.

On March 30, 2021, Axios reported that Gaetz was "seriously considering not seeking re-election and possibly leaving Congress early for a job at Newsmax". The same day, The New York Times reported the Justice Department's investigation of Gaetz. According to CNN, a person briefed on the matter said investigators also examined whether Gaetz used campaign money in his relationships with young women for travel and expenses and whether cash and drugs were involved. By April 2, the Justice Department was examining whether Gaetz asked women to recruit others for sex.

According to the 2021 reports, federal investigators were looking into Gaetz's September 2018 trip to the Bahamas. Gaetz was reportedly joined by marijuana entrepreneur and hand surgeon Jason Pirozzolo, who allegedly paid trip accommodations, traveling expenses, and escort services. Investigators were reportedly exploring whether the escorts were sexually trafficked for Gaetz and whether Gaetz accepted paid escorts in exchange for political access or legislative favors for Pirozzolo, who at the time chaired the board of the Medical Marijuana Physicians Association. Gaetz made two speeches for the organization while in Congress, and Pirozzolo gave two separate donations of $1,000 to Gaetz's campaign arm "Friends of Matt Gaetz", in March 2016 and May 2017. A spokeswoman for Gaetz denied the new allegations. A woman on the Bahamas trip—a Capitol Hill intern who did not work in Gaetz's office but who was dating Gaetz—reportedly agreed in May 2021 to cooperate with investigators, who believe she has information about Gaetz's financial transactions on the trip.

Investigators believe that Greenberg met women through a website for sex and introduced them to Gaetz, who also had sex with them. Evidence including mobile payment receipts reportedly suggesting Gaetz had illegally exchanged money for sex, such as May 2018 Venmo transaction records showing Gaetz sending $900 (with a memo referring to a woman) to Greenberg, who then relayed the money (with the memos "tuition" and "school") to three women, one of whom was 18. Joseph Ellicott, an associate of both Gaetz and Greenberg, pleaded guilty in January 2022 to two charges related to this investigation and is also cooperating with authorities.

Gaetz had argued in a November 2020 Fox News appearance that Trump "should pardon Michael Flynn [and] everyone from himself to his administration officials to Joe Exotic". In late 2020, Greenberg apparently attempted to secure a pardon from the Trump administration via a confession letter (first reported by The Daily Beast in April 2021), writing that he and Gaetz had had sex with a 17-year-old girl they believed was 19, and that payments had been made on behalf of Gaetz to her and other women in exchange for sex. Greenberg attempted to bribe Roger Stone with a $250,000 Bitcoin payment to secure a presidential pardon, texting Stone, "They know [Gaetz] paid me to pay the girls and that he and I both had sex with the girl who was underage." By the end of the Trump administration, Greenberg was under indictment, investigators had been questioning some Gaetz associates, and federal agents had seized the phone of one of Gaetz's former girlfriends. Gaetz's phone was also seized, and he changed his phone number in late December.

Defense and counter-claim of extortion
Denying any sexual relationships with minors, Gaetz said on March 30, 2021, that he did not plan to resign from the House. Also on March 30, he tweeted that he and his family were "victims of an organized criminal extortion involving a former DOJ official seeking $25 million". This allegedly began on March 16, with a text message to his father demanding money in exchange for making sex trafficking allegations "go away". Gaetz and his father purportedly received communications claiming that the FBI had photographs of Gaetz engaged in a "sexual orgy with underage prostitutes". The sender demanded millions of dollars to help secure the release of U.S. federal agent Robert Levinson (who had disappeared in Iran in 2007 and had already been presumed and declared dead), proposing that President Joe Biden would pardon Gaetz as a reward for freeing Levinson. The sender was later identified as Florida developer Stephen Alford, who was arrested on August 31.

Gaetz said his attorneys contacted the FBI, which he said informed them that Gaetz was a subject, not a target, of an investigation. He also said his father agreed to wear a "wire" to help the FBI record the alleged extortionists. Gaetz sent Axios screenshots of text messages, emails and documents outlining the alleged extortion scheme, which he asserted was being run by David McGee, a former federal prosecutor who has been a private attorney since 2005 and has represented the Levinson family. McGee's law firm called Gaetz's allegation "completely, totally false" and defamatory, telling The Daily Beast that Gaetz was attempting to distract from the sex trafficking investigation. Alford, who has previously been federally convicted of fraud and is represented by McGee, was federally indicted in August 2021 for allegedly conducting the scheme. Prosecutors alleged that Alford claimed he had contacts in the Justice Department who could arrange for a presidential pardon for Gaetz and directed Don Gaetz to wire the money to a trust account managed by McGee. McGee reportedly met with Don Gaetz before Alford did, but apparently did not discuss a presidential pardon, which Alford later admitted to the FBI that he had lied about his ability to arrange.

Also on March 30, Tucker Carlson interviewed Gaetz on Fox News. In addition to denying the allegations about his relationship with a 17-year-old girl, Gaetz denied a previously unreported claim that he had been photographed "with child prostitutes", and said that a friend of his (whom Carlson had supposedly met) had been urged by the FBI to claim Gaetz was "involved in some pay-for-play scheme". He also argued that "Providing for flights and hotel rooms for people that you're dating who are of legal age is not a crime."

Response and other developments
On March 31, 2021, House Minority Leader Kevin McCarthy said he had no plans to remove Gaetz from his seats on the Judiciary and Armed Services Committees, but that he might change his mind if Gaetz "gets indicted" or "if it comes out to be true."

On April 1, 2021, CNN reported that Gaetz had shown pictures of naked women to colleagues on the House floor. Gaetz had allegedly claimed to have slept with the women in the photos. The next day, his communications director, Luke Ball, and his legislative director, Devin Murphy, resigned. Both had begun working for Gaetz when he joined Congress in 2017.

On April 6, 2021, The New York Times reported that in the last weeks of the Trump administration, Gaetz privately requested a blanket presidential pardon for himself and others, which was reportedly denied because it would set a bad precedent. The next day, Trump publicly denied that Gaetz had asked him for a pardon. On April 8, it was revealed that Trump had reportedly wanted to defend Gaetz but was told to stand down due to the seriousness of the allegations.

On April 8, 2021, Gaetz's congressional office released a statement purportedly from his female employees vouching for his character, stating they "uniformly reject these allegations as false". Gaetz's new communications director, Joel Valdez, told Forbes that "all of the office's eight female staffers signed it", but the version of the statement that was released did not have anyone's signature or identify any specific employee. That evening, Representative Adam Kinzinger tweeted that Gaetz should resign, becoming the first congressional Republican to make such a call.

On April 9, 2021, the House Ethics Committee opened an investigation into allegations that Gaetz "may have engaged in sexual misconduct and/or illicit drug use, shared inappropriate images or videos on the House floor, misused state identification records, converted campaign funds to personal use, and/or accepted a bribe, improper gratuity, or impermissible gift". The committee deferred its investigation at the request of the Justice Department, but resumed it in June 2023.

In late April, Gaetz fundraised to run his own political ads, claiming that he was under attack by powerful interests such as "big government, big tech, big business, big media" that perceived him as a political threat. A public relations firm hired by Gaetz issued a denial statement regarding The Daily Beast's reporting on Greenberg's correspondence implicating him and Gaetz.

On May 17, 2021, Greenberg pleaded guilty to multiple crimes in a plea bargain in which he would have to cooperate with prosecutors.

By June, the federal investigation had reportedly broadened to include obstruction of justice, relating to a phone conversation Gaetz had with a witness. Later in June, ABC News reported that the investigation had engulfed many in the Central Florida political scene and that prosecutors could decide whether to bring charges against Gaetz as early as July. In August, ABC News reported that Greenberg had "provided investigators with years of Venmo and Cash App transactions and thousands of photos and videos, as well as access to personal social media accounts." These include September 2018 text messages between Greenberg and a woman engaging in prostitution, which indicate that a prostitute was arranged for Gaetz and that MDMA may have been proffered. A spokesperson for Gaetz said, "not one woman has come forward to accuse Rep. Gaetz of wrongdoing" and that Gaetz had "addressed the debunked allegations against him" on his new podcast, Firebrand. According to Greenberg, he made the arrangements for Gaetz

Two top Washington prosecutors—a public corruption investigator with an expertise in child exploitation crimes and a leader of the public corruption unit—have worked on Gaetz's case since at least mid-2021. Greenberg's sentencing hearing was originally scheduled for August 2021, but due to his cooperation in related investigations, had been repeatedly delayed. In January 2022, an ex-girlfriend of Gaetz's testified before a grand jury after being granted immunity; she reportedly had information relevant to two of three criminal charges being considered for Gaetz: sex trafficking a minor and obstruction of justice. (A year later, her attorney said that Justice Department prosecutors made the right decision not to charge Gaetz because "they didn't have evidence to prove a crime".) Gaetz was also accused of violating the Mann Act, which prohibits sex trafficking across state lines. Later in January 2022, Joseph Ellicott confessed that in 2017, he witnessed Greenberg telling Gaetz over the phone that the woman they had both had sex with was underage.

On December 1, 2022, thanks to his assistance with the prosecutors in a series of investigations, including those involving Gaetz, Greenberg was sentenced to 11 years in prison, plus 10 years of supervised release. The sentencing judge, Gregory A. Presnell, said, "He has provided substantial cooperation to the government...more than I've seen in 22 years."

Conclusion of DOJ investigation
A September 2022 Washington Post article reported that prosecutors have recommended not to charge Gaetz in the sex trafficking investigation, telling Justice Department superiors that a conviction is unlikely in part because of credibility questions about the two central witnesses. In February 2023, the DOJ communicated to the attorneys for Gaetz that they had concluded their investigation and would not be laying charges against him, effectively ending a multiyear probe including allegations of misconduct.

Re-opening of Investigation by House Ethics Committee
In July 2023 it was reported that the House Ethics Committee had re-opened the investigation into allegations about Gaetz's sexual misconduct, illicit drug use, and other misconduct they had initially started in 2021. The probe by the committee had been paused while DOJ were carrying out investigations over allegations that he had sex with a minor.